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Sizeable Sell-Off Extends As CAD CPI and US Retail Sales Come Into View

CANADA
  • Canadian rates have continued to extend underperformance to their US counterparts today, buoyed by strong CAD housing data and the weak US Empire mfg.
  • In GoCs, 2-5Y tenors lead the relative shift with 2YY +7.0bps vs +1.3bps for Tsys and 5YY +7.6bps vs +1.5bps.
  • An eye is kept on the early June extension as it can help narrow Can-US yield spreads although that tends to weigh more heavily on the longer end (with RBC estimating 2-5bps) suggesting that is still to play out with 30YY +5.7bps vs +4.5bps for Tsys.
  • Similar moves are seen in rates, with BAX futures down 3 ticks for the front Jun’23 and 7-7.5 ticks through to 3Q24 in contrast to at most -1.5 for the front SFRM3 and small gains for 2024 contracts.
  • Two potentially key releases land tomorrow with US retail sales and CAD CPI together at 0830ET, followed by US IP at 0915ET.

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